Online Content Model in Europe: Film and Video go Broadband

Online Content Market in Europe:Film and Video go Broadband

IIC Telecommunications and Media ForumMadrid, 25 June 2008

Augusto PretaITMedia Consulting

Online Content Market in Europe. Film and Video go Broadband. IIC Telecommunications and Media Forum, Madrid, 25 June 2008 2

TV vs Internet?

A different story

Internet distribution acts as free advertisingInternet distribution acts as free advertising

Web video may reach consumers who wouldn't otherwise watch TVWeb video may reach consumers who wouldn't otherwise watch TV

Web video could gain viewers without causing losses for content creators Web video could gain viewers without causing losses for content creators


Online contentElectronic sell through

• More and more companies are using broadband internet to distribute Studios films and series

• Growing number of Download-to-Own services, DTO, in Europe: LoveFilms, Glowria, CanalPlay, CinemaNow, In2Movies … more than 30 services in WE.

• In the near future physical supports – i.e. DVD – will still represent most of film purchases by consumers, but spending on digital content is to grow quickly.

• Even though online movies represent only a fraction of the home entertainment market, it’s a growing area, compared with constant revenues from DVD sales


Business models

TRANSACTIONALConsumers buy a permanent download [download to own, DTO], hire a temporary download [download to rent, DTR], or buy a temporary access to a stream content [rent VOD]

TRANSACTIONALConsumers buy a permanent download [download to own, DTO], hire a temporary download [download to rent, DTR], or buy a temporary access to a stream content [rent VOD]

SUBSCRIPTION Users subscribe to a rental service “all included”, offering temporary downloads or streams, charging a monthly fee [Subscription VOD, SVOD] i.e. CinemaNow, Movieflix

SUBSCRIPTION Users subscribe to a rental service “all included”, offering temporary downloads or streams, charging a monthly fee [Subscription VOD, SVOD] i.e. CinemaNow, Movieflix

AD-SUPPORTED Consumers download free content, or watch streaming content for free but they have to accept commercials inserted in the downloaded content [Free VOD, FVOD] i.e. Lovefilm, BBC iPlayer

AD-SUPPORTED Consumers download free content, or watch streaming content for free but they have to accept commercials inserted in the downloaded content [Free VOD, FVOD] i.e. Lovefilm, BBC iPlayer


TV, too…

• Also TV producers have started to test consumers’ demand for electronic sell through

• Also TV producers have started to test consumers’ demand for electronic sell through

• Many broadcasters, like Channel 4 in the UK and ProSieben in Germany have started to offer their content for online distribution

• Many broadcasters, like Channel 4 in the UK and ProSieben in Germany have started to offer their content for online distribution

• 2007: more and more news and entertainment videos from broadcasters appear on the internet, on their own website but also on other service providers’ portal

• 2007: more and more news and entertainment videos from broadcasters appear on the internet, on their own website but also on other service providers’ portal

• TV broadcasters may convert into a role similar to that of a movie studio, funding high quality content and then distribute it via many channels - online, DVD and television

• TV broadcasters may convert into a role similar to that of a movie studio, funding high quality content and then distribute it via many channels - online, DVD and television

• Broadcasters will still be a reference point to the public, start being a distributor for third parties’ content

• Broadcasters will still be a reference point to the public, start being a distributor for third parties’ content


Case History: 4oD

4oD Offer

• all of Channel 4’s commissioned programming

• 2 0 00 hours of archive – and growing

• 60-70 hours catch-up every week, with the last 30 days of programming

• 200 hours of US first run premium films and programming

All content can be downloaded, while catch-up content can also be seen as streaming video.

Content is available free, PPV, DTO, subscription, downloaded and streamed .

At the end of 2007, over 500 000 users have viewed more than 10 million programmes on 4oD on TV and PC.

4oD Offer

• all of Channel 4’s commissioned programming

• 2 0 00 hours of archive – and growing

• 60-70 hours catch-up every week, with the last 30 days of programming

• 200 hours of US first run premium films and programming

All content can be downloaded, while catch-up content can also be seen as streaming video.

Content is available free, PPV, DTO, subscription, downloaded and streamed .

At the end of 2007, over 500 000 users have viewed more than 10 million programmes on 4oD on TV and PC.

Launch: November 2006

4oD allows some internet, Virgin Media, Tiscali and BT Vision users to view programming recently shown on Channel 4, E4 or More4, or from their archives. 4oD also includes a selection of films and content from the National Geographic Channel and FX


Broadcaster online

• Broadcasters are in a unique position to take their video libraries and create new forms of media for consumers

• By adopting web 2.0 techniques - such as consumer rating systems and new combinations of content – TV players could create a sense of community, much like that of social networking sites like MySpace and Facebook

• Broadcasters have the breadth of content, and could lever onto their brand or other assets, including talents, to promote such services.

• Broadcasters can launch online initiatives beyond just replicating the content on TV


Internet distribution vs TV

Older shows often do surprisingly well on demand, even when they're no longer on the linear network: chance for monetizing archives and catalogue

Older shows often do surprisingly well on demand, even when they're no longer on the linear network: chance for monetizing archives and catalogue

Advertising insertion probably is the biggest key to monetizing this part of the business Advertising insertion probably is the biggest key to monetizing this part of the business

TV players should not be afraid of the internet as a distribution platformTV players should not be afraid of the internet as a distribution platform

Internet doesn’t replace broadcastersInternet doesn’t replace broadcasters

There's still a market for high-quality content. To create programming at a high level of quality is an expensive proposition. TV players have professional skills and resources that others don't have.

There's still a market for high-quality content. To create programming at a high level of quality is an expensive proposition. TV players have professional skills and resources that others don't have.


The market

20072 million people in WE used legal pay download services for professional content; more than double downloaded free content – mainly TV programmes.

20072 million people in WE used legal pay download services for professional content; more than double downloaded free content – mainly TV programmes.

2007€116 million total revenue€91 million DTR services€10 million DTO services


80%

8%12%

68%

8%

24%

64%

9%

27%

60%

8%

31%

54%

8%

38%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011

DTR DTO FVOD

Online video revenue breakdown

Source: ITMedia Consulting The take rate for DTO services is still lower than that for DTR services, because of higher prices

The take rate for DTO services is still lower than that for DTR services, because of higher prices




Critical issues for online services

• Difficulties in convincing consumers to purchase movies via online services vs. a traditional DVD

• WE: average DTO film price ~€12 , average DTR film price <€5. Both prices are higher than hiring a DVD

• For some times, most downloadable content has been in the form of independent films. Only recently majors have started providing more valuable and attractive content .

• Downloaded content doesn’t offer the same amount of content as a DVD ex. director’s cut

• A large segment of the DVD-buying population isn’t very tech-savvy.

• DTO services get compelling for those users who attach great value to portability

• These factors, price, portability, together with the window during which downloads are sold, are to drive the growth of DTO and DTR services to mainstream products.


Online video revenues forecast – million €

Mln € 2007 2008 2009 2010 2011

DTR 92 155 299 482 701

DTO 10 19 45 67 100

Free VOD 15 55 127 251 497

Tot. On demand 117 229 471 800 1 298

Source: ITMedia Consulting


IPTV in Europe

Europe: first market for IPTV in the world, both as for growth rates and as for subscriber base – 5.2 million in 2007Europe: first market for IPTV in the world, both as for growth rates and as for subscriber base – 5.2 million in 2007

However, the IPTV does not represent a threaten or a competitive pressure onto cable and satellite yetHowever, the IPTV does not represent a threaten or a competitive pressure onto cable and satellite yet

France: biggest market, 2.6 million subscribers. In other countries results are lower than expectedFrance: biggest market, 2.6 million subscribers. In other countries results are lower than expected


IPTV VoD revenue

• For coherency, we do not consider revenues coming from linear TV, but only those generated by on demand services, which represented around 25% of total revenues in 2007

• The on demand component of the whole IPTV industry amounted to €250 million at the end of 2007, but it will approach €1500 million by the end of 2011, growing at an average rate of 120% per year

Mln € 2007 2008 2009 2010 2011

VOD+SVOD 225 408 644 852 1193

Free VOD 25 72 124 198 267

Tot. On demand 250 480 768 1050 1450


• Despite these results, the video on demand business has grown less than expected: linear TV will represent the largest share of revenues also in the forthcoming years


Online content and IPTV

• The online video market in WE is to grow at such a rate that it will get closer and closer to the IPTV market.

• It amounted to less than half the IPTV market in 2007, but it will grow at a double pace

• By 2011, the online video content market will represent 90% of IPTV market

• The online video market in WE is to grow at such a rate that it will get closer and closer to the IPTV market.

• It amounted to less than half the IPTV market in 2007, but it will grow at a double pace

• By 2011, the online video content market will represent 90% of IPTV market

Online content and IPTV

0

200

400

600

800

1000

1200

1400

1600

2007 2008 2009 2010 2011

'000 €

Online v ideo content IPTV



Conclusion

Evolving new business models are gradually redefining the value of content in the digital age. Evolving new business models are gradually redefining the value of content in the digital age.

We see convergence to reshape business models, industry returns, expenses and profits for content companies willing to follow this trend. Exploiting innovation, they will increase revenue across a spectrum of broadband devices in a highly competitive and open multiplatform environment

We see convergence to reshape business models, industry returns, expenses and profits for content companies willing to follow this trend. Exploiting innovation, they will increase revenue across a spectrum of broadband devices in a highly competitive and open multiplatform environment


Thank you for your attention

www.itmedia-consulting.com

Thank you for your attention

www.itmedia-consulting.com

Economy & Finance

Online Content Model in Europe: Film and Video go Broadband